Client rolled over IRA from one custodian to the next. Previous advisor charged advisory in arrears and sent refund check directly to the client. Client cashed the check.
Will they get a 1099 and have to pay a penalty if nothing is done?
Can they deposit the money back into the IRA and code as a rollover?
Thank you Alan.
It was technically a transfer from one IRA account to another at the same custodian. Prior manager charged a fee in advance in which they refunded pro-rata via check to the client and they cashed it in their bank.
Can the client deposit that amount back into the “transferred” IRA and how should that be coded with Schwab?
Sounds like the advisor fee refund check was issued by that advisor and did not come from the IRA even if the original fee had been debited from the IRA. Usually any fee reimbursement would be credited back to the IRA if still open or to the new IRA if not. Since there evidently was no actual distribution, there will be no 1099R that could have funded a 60 day rollover.
If this is what happened, the IRA will be short the refunded fee, but the client will have paid no tax on the refunded fee.
Permalink Submitted by Alan - IRA critic on Tue, 2024-11-12 13:38
If client has done a 60 day rollover in the past 12 months, they cannot do another one. Was the rollover a 60 day or was the entire IRA balance moved by direct transfer?
But I am not following what happened here. If IRA advisory fees are billed in arrears, why would there be any refund? And was the refund check an IRA distribution or a check from the advisor? Please clarify further what happened here.